THE LEADINGMARITIME CAPITALSOF THE WORLD2O19A Menon Economics and DNV GL Publication

A Menon Economics and DNV GL Publication

Authors: Menon team: Erik W. Jakobsen, Sunneva Juliebø, Lars Martin Haugland, Håvard BaustadDNV GL team: M. Shahrin Osman, Deepti Sewraz, Alina Villemin

Design: Ludvig HolmenDaniel Barradas

Photos: iStock

CONTENTS

EXECUTIVE SUMMARY 4

THE MARITIME INDUSTRY 8

THE LEADING MARITIME CAPITALS OF THE WORLD 12

SHIPPING CENTERS 18 MARITIME FINANCE AND LAW 24 MARITIME TECHNOLOGY 28 PORTS AND LOGISTICS SERVICES 34 ATTRACTIVENESS AND COMPETITIVENESS 38 THE LEADING MARITIME CITIES OF THE FUTURE 42 APPENDIX A: LIST OF OBJECTIVE INDICATORS OF 30 CITIES 44

APPENDIX B: METHODOLOGY AND DATA SOURCES 46

4 5

EXECUTIVE SUMMARY

RANKING

2HAMBURG

1SINGAPORE

3ROTTERDAM

5LONDON

4HONG KONG

More than half of the world’s population live in cities and it is predicted that two-thirds of the world population will be living in urban areas by 2050, according to United Nations estimates. The impor-tance of city regions will therefore continue to grow. Cities are the centers of knowledge, talent, innova-tion and specialization of production and services. In today’s world, particularly for the maritime industry, cities are to an increasing extent competing to attract the best companies, startups and most talented people. The winners in this race for attractiveness are – and will continue to be – the leading maritime centers of the world.

Two years after its last publication, the 2019 edition of Leading Maritime Capitals report is back, with a fresh insight about which maritime capitals provide the best support, in terms of soft and hard infrastruc-ture and world-class talent, to allow maritime busi-nesses and people to connect and thrive. Similar to its previous editions, the LMC 2019 report covers 5 pillars – Shipping Centers, Maritime Finance and Law, Maritime Technology, Ports and Logistics, Attractiveness and Competitiveness – on which the maritime cities are benchmarked. Under each pillar a comprehensive set of objective and subjective indi-cators have been considered. For the 2019 report, some new and more comprehensive objective and subjective indicators as well as data sources have been used to ensure that the analysis is based on reli-able and complete data for the various cities, which ultimately allow for a more refined benchmarking of the relative performance of each city compared to the previous report. For the subjective indicators on

each pillar, these come in the form of the perception and assessment by nominated business executives – mostly shipowners and managers – from around the globe. Of these 200 experts called upon for this study, around 40% are based in Europe, 30% in Asia, and the remaining 30% are from America, Middle East and Africa.

Singapore maintains its position as the leading maritime capital of the world. Despite the “new normal” economic conditions in traditional shipping and the still weak offshore service market, Singapore has been able to retain its position as a world leading maritime hub due to its strength in all pillars. Singapore is still outperforming other cities in the Shipping Centers, Ports and Logistics, Attractiveness and Competitiveness pillars, and for the remaining two pillars it is within the top 10 cities.

Whilst Singapore, Hamburg, London and Tokyo have maintained their previous ranking, other cities have seen an improvement in their overall score. Dubai has climbed up by one rank and is now in the 9th global position for leading maritime cities, followed by Busan which also saw a positive move in its in score. It is, however, Rotterdam and Hong Kong that show the greatest development in their rank. Rotterdam has moved up three places and is now ranked 3rd and Hong Kong, with a similar upward move, is now in the 4th position. Rotterdam has improved its score across all pillars, with the biggest positive change in the Shipping Centers pillar, with an increase in the size of its controlled as well as managed fleet. The fleet controlled by owners based in Rotterdam has increased by 50%, whilst the fleet size

OBJECTIVE INDICATORS SUBJECTIVE INDICATORS

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that is managed from there has grown by close to 60%. Rotterdam has moved up in the Maritime Finance and Law pillar, largely due to a 50% increase in loan value from 2017. Unlike Rotterdam, Hong Kong’s improvement has not been across all the pillars. Its score has climbed up in three of five pillars; Shipping Centers, Maritime Finance and Law, and Ports and Logistics pillars. Hong Kong is popular for its strong infrastructure in promoting and supporting the ease of conducting shipping business there, with efficient customs procedures. Hong Kong is ranked 2nd by the industry experts as the most attractive location for shipping operations. In terms of the number of listed maritime companies on their local stock exchanges, Hong Kong has also boosted its numbers since 2017, indicating that it is an attractive market for registering new stocks. When considering the trading volume of bonds, IPO and follow-on offerings from each city’s stock exchange during the period 2017 to 2019, Hong Kong is in the 2nd position right after New York.

An interesting observation is that most cities are ranked consistent across the objective and subjective indicators. Two cities stand out: Oslo and Tokyo. Oslo is ranked 2nd on the subjective indicators, but only 10th on the objective (down 7 places). For Tokyo, the story is the other way around: 3rd on the objective, but only 11th in the subjective. The main reason for Oslo’s weak ranking on the objective indicators, is the lack of a substantial port, giving Oslo a 50th place on the Port and Logistics pillar. The same holds for Copenhagen, a city that is ranked 8th on the subjective indicators and only 16th on the objective. For Tokyo, the explanation is not as straightforward, because Tokyo is ranked lower by the maritime experts on all five pillars than on the objective indicators.

The maritime industry is on the verge of a digital transformation including the adoption of disruptive and innovative technologies. The maritime industry

experts voted Singapore, Oslo, Copenhagen and London to be the cities best prepared for the digital transformation of the industry. Oslo has also forged its position as the world’s leading center for sustain-able technologies and solutions for the oceans.

Looking five years into the future, our experts still predict that Singapore will keep its position as the global leader, while Shanghai is expected to increase its importance and become the second most impor-tant maritime city. The race to be the leading city in Europe is still open with Oslo, London, Hamburg, Athens and Rotterdam as the leading contenders in this regional race. In the Middle East, India and Africa region, Dubai is the leading maritime center and at a global level, now ranked 9th. The experts predict that Dubai will continue to grow in importance and could be in the top five of the world’s most important mari-time centers by 2024, albeit with strong competition by the European cities as well as Hong Kong.

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China, all serve as important remainders how fragile the inter-national system is. What is clear, however, is that geopolitical tensions and trade policies will continue to influence the industry going forward just as it has done for the last centuries.

Transnational companies operate across the entire world, taking advantage of economic differences by locating their busi-ness activities in the most attractive locations. This global trend has been a key factor why world GDP has doubled since 1995 and world trade has quadrupled. At the same time, it also represents a tremendous challenge to countries: it can no longer be taken for granted that companies will stay in their home countries. To an increasing extent, states and cities must compete to attract and retain international firms. In other words, they have to be attrac-tive hosts.

Shipping has always been an international industry. In fact, shipping is the premise for international trade. A central driver for the global shift described above has been the operational and technological development of the shipping industry, which has lowered transportation costs dramatically. With the emergence of standardized bulk carriers, oil and other raw materials could be traded globally. Today most shipping markets, including cruise, offshore and car carriers, are globalized. Maritime services, however, have until the last decade been relatively national or

regional, often located around the shipowning companies. Ship finance was among the first to globalize, while legal services, due to national jurisdictions, have been the most national of the mari-time services. English law firms have been the exception, with branches in shipping hubs all over the world, since English law is commonly chosen as the jurisdiction in contracts of trade and chartering.

Today, most maritime services are globalized. For example, the five leading classification societies class 82% of the world’s ships, and the two largest book runners for ship finance cover one sixth of the global market. Even port operations are becoming globalized. One of these companies is the Port of Singapore Authority (PSA) that was corporatized in 1997. PSA is now one of the world’s largest port operators with operations in many key markets.

Partly as a contributing factor to, and partly as an effect of global markets, maritime companies have also become globalized. For example, the Swiss-based Mediterranean Shipping Company (MSC) has a worldwide presence with close to 500 offices in 150 countries and close to 25,000 employees. The structure of the companies varies greatly, but the dominant trend is to build corpo-rations around specialized business units with a global reach. The John Fredriksen Group is a good example of this. The group

THE MARITIME INDUSTRY

AIMING FOR AN EFFICIENT GLOBAL REACH

For decades, the world economy has become increasingly inte-grated with a shift of global economic power to emerging economies. According to Peter Dicken, a British professor of Economic Geography, a “global shift” (Peter Dicken, 2015) has transformed the world economy. The main characteristics of this shift are market integration, strong growth in international trade, foreign direct investments, the emergence of transnational companies and a dramatic increase in interdependence between nations. Although the globalization process does not seem as straight-lined as it did some years ago, the world will continue to be highly interdependent and bound together by shipping and maritime activities.

Shipping has and will continue to play a vital role for interna-tional trade and the division of labor. The growing demand for raw materials and goods in China and other emerging markets lead to a commodity boom and shipping market bonanza in the early 2000s. From 1995 until today, world GDP doubled and world trade quadrupled. However, in the last few years we have seen both weak GDP growth and a weakened relationship between GDP growth and demand for shipping services. The ClarkSea Index (measuring earnings for the main vessel types) ended above USD 10,000 at the end of year 2018 (year average

of USD 12 144), while the Baltic Dry Index reached a level of 690 points in March 2019 after a relative volatile recovery from the record low level reported in February 2016 (a score of 291). The offshore market is also characterized by a large part of the OSV fleet in lay-up, and yards around the world are struggling to fill up existing capacity. With one of the largest bankruptcies in ship-ping recorded in 2016, with South-Korean container giant Hanjin Shipping filing for bankruptcy, other players in the shipping industry have been looking into consolidation and cost efficien-cies. In the past recent years, new alliances have occurred, with, for example, German Hapag-Lloyd’s merger with the Middle Eastern container shipping line United Arab Shipping Company (UASC), CMA CGM’s acquisition of Singapore’s national carrier NOL/APL, and the amalgamation of the container segment of Kawasaki Kisen Kaisha, Ltd. (K Line), Mitsui O.S.K. Lines, Ltd. (MOL), and Nippon Yusen Kabushiki Kaisha (NYK), to form the new joint venture Ocean Network Express (ONE).

The world in 2019 might continue a path of becoming increas-ingly integrated, but recent political events suggest that the world might be heading in the exact opposite direction. For example, the US threatening international cooperation and trade, the messy and damaging disentanglement of Britain from the European Union, and other political feuds between several countries and

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consists of companies specialized in segments like rigs (Seadrill), crude carriers (Frontline) and dry bulk (Golden Ocean). The loca-tion of companies has also become globalized. Value chains split up, with headquarters located in financial centers, operating units close to markets, and R&D units in knowledge hubs. The group is also an example of how some companies are broadening their focus to more than one specific segment. Both the Fredriksen Group and A.P. Moller-Maersk Group are examples of groups that focus on broadly diversified segments within the industry – although Maersk has decreased their strategic scope recently.

DIGITAL TRANSFORMATION, CYBER SECURITY AND INNOVATION

Digitalization is happening across all industries and change the way we work and live. For the maritime industry, whilst disrup-tive innovation is the current buzzword, its digital transforma-tion is under way, challenging existing business models but also offering new opportunities.

Digital capabilities are important in the entire maritime industry, which is already seeing a trend whereby crew size is steadily decreasing, whilst software, automation, centralisation and interconnectivity are on the rise. Many maritime companies are already quite technology-driven, with most of their bookings and orders coming through the internet, their internal processes based on digital solutions – and with some shifting to using block-chains to increase their operational efficiency and transparency – as well as their infrastructural and/or assets’ operations based on cyber-physical systems (systems coupling digital software with hardware). To adapt to this new reality, some shipping compa-nies and maritime technology providers have a designated Chief Digital Officer (CDO) on their management team. However, for most other players in the maritime industry, there are still uncer-

tainties about the extent and momentum to which digitalization will affect them, based on concerns related to the need to stand-ardize digital practices, and the change of organizational culture and mindset.

Under the umbrella of digitalization, we have assigned another hot topic in the maritime industry: cyber security. Vessels are becoming smarter constantly as they increase their connec-tivity, control and most importantly their operation is based on Operational Technology (OT). This provides tremendous benefits in terms of safety, availability, and energy efficiency, but at the same time opens doors to cybercrime which is recognized as the biggest emerging challenge of the industry in 2017 alone, the total cost of cyber threats to shipping is estimated at more than 1 billion USD. Cyber security is thus increasingly becoming an integrated part of the safety topic of maritime companies, with the strategic decision of many big maritime players to establish an Information Security Management System and seek compliance to the robust ISO 27001 standards to build confidence among their stakeholders.

In terms of disruptive innovation, the maritime industry has already been introduced to it, whether in the form of additive manufacturing or as the concept of autonomous ships being operated remotely, to name a few. The port of Rotterdam will have its own ‘Additive Manufacturing FieldLab’ with 3D metal printers. This lab will provide port-related companies with a collective location to accelerate developments in this area and to work together on applications for the maritime industry. Yara Birkeland, the world’s first fully-electric, zero-emission and autonomous container ship developed by Kongsberg in collaboration with Yara, is due to be launched in 2020 and will operate within Norway. Another upcoming area is the develop-ment of algorithms for predictive maintenance and asset integ-rity, wider application of Drones for maritime sector and the

use of AI-powered algorithms for optimized stowage plans for container ships.

With the force at which digitalization is propagating and newly emerging disruptive technologies springing across the globe, there is an increasing and critical need for a radical improvement of the digital infrastructure for the maritime industry, and an environment that supports the collaboration between maritime companies, technology companies and progressive regulators and assurance providers. A location that can offer this will have a strong competitive edge.

ALTERNATIVE FUELS AND TECHNOLOGY

Global environmental concerns about the invasion of aquatic organisms, GHG (greenhouse gases) and SOx emissions from the shipping industry, have led the IMO in recent years to imple-ment initiatives aimed at limiting the impact of these. As a conse-quence, ballast water management has been implemented and the carriage ban of fuel with more than 0.50% sulphur content will be enforced as of 1st January 2020. Other potential game changers in the maritime industry include the Tier III NOx requirement, the stronger push for new vessels having improve EEDI (Energy Efficiency Design Index), as well as measures for monitoring and reporting of CO2 emissions from both the EU and IMO.

To navigate in such regulated waters, potential solutions have become available in various parts of the world, whether from scrubber manufacturers or providers of alternative fuels such as LNG. There is thus a need for countries and cities to provide an infrastructure that supports such upcoming aspects of the mari-time industry.

Considering this global view of where maritime industry is heading (in terms of its global reach, its uptake of digitalized and innovative solutions, its requirement for new fuels), there is a strong competition on which capitals around the world will provide the best support, in terms of soft and hard infrastructure and world-class talent, to allow maritime businesses and people to connect and thrive.

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CITIES – ENGINES OF INNOVATION AND GROWTH

Urbanization is one of the strongest global megatrends in this century, with a clear shift in importance from nations to cities (Moretti, 2012; Quartz, 2015). Today, more than half of the world’s population live in cities. These cities generate 80% of global GDP (World Bank, 2017). In 2016, there were more than 500 cities globally with more than 1 million inhabitants (United Nations, 2017). China alone is home to more than 100 cities with more than 1 million inhabitants, a number that is likely to double in the next decade. Companies are increasingly focusing on city regions when developing their strategies for relocation or expan-sion of their operations. Population projections show that virtu-ally all growth over the next 30 years will come in urban areas. Every year the world’s cities are growing by 60 million people, roughly equal to the current population of the United Kingdom.

The influx and agglomeration of people, companies and invest-ments is fueled by the vibrant knowledge-creation and innova-tion of the cities. High concentration of competent people in cities

generates more opportunities for interaction and communica-tion, promotes creative thinking, creates knowledge spillovers and develops new ideas and technologies. Cities also facilitate trade and commerce by providing super market places. Hence, all knowledge-based industries tend to centralize in a few leading city regions; San Francisco for ICT, Boston for biotechnology, Houston for oil & gas, London for finance – and Singapore for maritime. It is not, however, a “winner-takes-it-all” game. There is room for cities with leadership in niches of industries, like Geneva in medtech, and London in fintech. There is also room for cities with regional leadership, like Shenzhen in ICT and Singapore’s Biopolis for biomedical science.

MARITIME COMPANIES – RESTRUCTURING WITHIN A GLOBAL PLAYGROUND

Aware of such international competition, cities are developing strategies to enhance their attractiveness to highly productive and innovative companies, and to talented individuals. The more mobile the companies, the stronger the competition among cities

to attract them. As the maritime industry is global in nature, many maritime companies are mobile entities seeking to take advantage of localization advantages in different countries. This, combined with the maritime industry being a high value-added industry, means that the fight to attract maritime companies is tough, especially for shipping being the most highly mobile sector within the maritime industry. This also implies that it is easy to lose maritime business activities. The gains from winning the location race are hence higher for the less mobile part of the industry.

Specialized knowledge-based services are probably the least mobile companies in the maritime industry. The reason being that knowledge-based companies often have links to universi-ties and are deeply embedded in the local milieu; for example, in their reliance on specialized local competence. Another impor-tant point, following from the fact that firms increasingly split up their value chains, is that cities compete to attract activities – not companies. The winners in the future will be those cities that are able to attract:

• Science and higher education

• Owners and headquarters• R&D – product and technology development• Financial, legal and other sophisticated business services

While many cities are important centers in today’s maritime industry, some researchers suggest that we might see a future concentration of shipping activity (Center for Liveable Cities, 2014). Martin Stopford was one of those who proposed that we will see a development of two or three global centers characterized as “shipping super cities” - one city in each of the eight-hour time zones (Asia, Europe and the Americas). This will mean that some of today’s shipping centers will lose importance to a few global centers that will act as shipping service hubs. Stopford also went further, dividing the cities into cargo port cities and shipping services ports. Port cities, such as Rotterdam and Shanghai, are mainly driven by their role of transporting cargo to the regional markets. In shipping services ports, on the other hand, the port is secondary while offering other services to the international ship-ping industry will be key.

THE LEADING MARITIME CAPITALS OF THE WORLD

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ALL MARITIME CITIES IN THE WORLD

15 LEADING MARITIME CITIES - benchmarked on both objective indicators and

expert assessments

50 NOMINATED CITIES - benchmarked on objective indicators only

THEORETICAL MODEL OF INDUSTRIAL COMPETITIVENESS Source: Jakobsen et al, 2003 (Attracting the winners)

CLUSTER DYNAMICS

Demanding customersLocal rivalryCooperation

Open information and trustMobility of competence

LONG TERM RELATIVE INDUSTRY

PERFORMANCE

PUBLIC POLICY

Fiscal and monetary policy

Tax & subsidies Regulations

Labour marketEducation

R&d

COMPANY COMPETITIVENESS

OPERATIONAL EFFICIENCY &

STRATEGIC RESOURCES

CITY ATTRACTIVENESS

(Availability, quality and price)Talent, capital, infrastructure, connectivity, business friendliness, living conditions, etc.

SINGAPORE

ROTTERDAM

HAMBURG

TOKYO

LONDON

SHANGHAI

HONG KONG

BUSAN

DUBAI

OSLO

NEW YORK

COPENHAGEN

HOUSTON

ANTWERP

ATHENS

MUMBAI

GUANGZHOU

SEOUL

HELSINKI

KUALA LUMPUR

ISTANBUL

BERGEN

MIAMI

DALIAN

NEW ORLEANS

IMABARI

JAKARTA

LOS ANGELES

SEATTLE

VANCOUVER

PARIS

QINGDAO

GLASGOW

GENOA

BEIJING

KOBE

MARSEILLE

WASHINGTON D.C.

ABERDEEN

TIANJIN

NINGBO

PANAMA CITY

SYDNEY

LIMASOL

HO CHI MINH

STOCKHOLM

MANILA

SAINT PETERSBURG

DURBAN

VALLETTA

50 NOMINATED MARITIME CITIES ORDERED BY RANKING ON THE OBJECTIVE INDICATORS

DRIVERS OF COMPETITIVENESS

There are lots of inter-connected factors that drive the attrac-tiveness of a city and the competitiveness of the industries located there:

• Strategic location• Favorable and stable political framework• Transparent and efficient legal framework• Proximity to large, demanding customers• Local rivalry – creates incentives to continuous improve-ments and innovation• Abundance of suppliers and service providers• Specialized universities and research institutions• Large pool of talents• Rich and open flow of knowledge and ideas• Relationships based on trust• Meritocratic education and career system• Soft location factors – an attractive place to live for families and individuals

Together, these factors produce spirals of self-reinforcing growth – or decline, if the factors are absent. The mechanisms that drive industry competitiveness are summarized in the model below.

For the maritime industry in a city to prosper, two conditions must be satisfied: the companies must be competitive, and the city must be attractive as a host for these companies. These two condi-tions are mutually dependent: the companies gain their competi-tiveness from resources available in the city; for example, access to capital, talent and specialized supplies – and the price they must pay for these resources. Accordingly, the attractiveness of the city increases when competitive companies are present in the city. Hence, the clue is to attract the winners (Jakobsen, et al 2003). Over time, the attractiveness of the cities is gradually shaped by the dynamics of the industry. In an industry with strong cluster dynamics, knowledge is continuously improved and dispersed, upgrading both companies and resources. Finally, governments play a central role in defining the attractiveness of the city. Through various public policy factors like taxes and subsidies, they determine the price of capital, labor and other input factors. The quality of the resources is to a large extent determined by investments in infrastructure, education and R&D.

The four main elements in the model, public policy factors, the competitiveness of the companies, the attractiveness of the cities, and finally, the dynamics of the industry clusters, are measured and benchmarked for the maritime industry in 30 cities.

BENCHMARKING BASED ON OBJECTIVE & SUBJECTIVE INDICATORS

The Leading Maritime Capitals report for 2019 is the fourth edition of this report. Again, the ranking was based on a combi-nation of objective data from leading sources and subjective measures to assess and benchmark the 15 leading maritime cities. This approach offers the advantage of considering both hard facts (objective indicators) as well as expert opinions (subjective indica-tors) in areas that are difficult to measure with available objective data at city level (such as regulations, cluster dynamics, techno-logical expertise and other capabilities).

One major difference (and improvement) in this year’s report compared to its previous editions is that the identification of the top maritime cities in the world is now carried out by using a bottom-up approach, whereby all maritime cities in the world are initially considered before being narrowed down to the top 50 through several rigorous elimination and ranking rounds across the different pillars. In the previous reports, a top-down approach was used which was based on the subjective nomination of top 30 maritime cities in the world. The revised bottom-up approach instead allows for the objective selection of the top 50 maritime cities before the leading 15 cities are extracted for further ranking through the subjective assessment by nominated business execu-tives from all around the globe. The main benefit is that this new approach is more transparent and comprehensive. Note that with this year’s bottom-up approach, direct comparison of values between 2019 and 2017 is not possible as some cities are out of sample in the 2017 ranking. The approach is illustrated as follows:

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There are numerous ways to assess the strength of the maritime cities. Data sources that are widely used and renowned in the industry have been used. Method-ology and data sources for the indicators are described in the appendixes.

In this year’s report, for the objective assessment, previously used objective indicators were revised to be based on new databases whilst new objective indica-tors were also included. The overarching aim has been to ensure that the analysis is based on reliable, com-plete and improved data quality for the various cities. Hence, adjustments to the data sources and/or indica-tor set, where deemed necessary, have been made. For the five pillars in this study, a total of 25 objective indi-cators have been used.

For the subjective assessment, this comes in the form of the perception and assessment by key business ex-

ecutives – mostly shipowners and managers – from all around the globe. Of these 200 experts called upon for this study, around 40% are based in Europe, 30% in Asia, and the remaining 30% are from America, Middle East and Africa.

The study uses a ranking model consisting of objec-tive and subjective rankings that are weighted 50% each. All indicators are normalized to allow compari-sons of different data on a common scale. After nor-malizing the data, an arithmetic average is used to rank the different cities within five main pillars. Each pillar is weighted 20 percent. The five pillars of the study are the same as in the last edition of the report: Shipping, Maritime Finance and Law, Ports and Logistics, Mari-time Technology, and Competitiveness and Attractive-ness. The full list of indicators is described in these ta-bles.

INDICATORS FOR CITY RANKING

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SHIPPING CENTERSSUMMARY

21 3 4 5HAMBURGATHENSSINGAPORE HONG KONG SHANGHAI

RANKING OF SHIPPING CENTERS

OBJECTIVE INDICATORS SUBJECTIVE INDICATORSWhen assessing the importance of the world’s shipping centers with an equally weighted combination of four objective indica-tors and subjective evaluations from 200 leading maritime professionals, Singapore, Athens and Hamburg take the top three spots in the total ranking of the leading shipping centers. With Hong Kong and Shanghai coming next in the ranking, this means that three of the top five shipping centers are now located in Asia. This is a change from the 2017 edition of this report, where European maritime cities were leading the top five.

A general observation for the shipping pillar is that the Asian-based maritime cities have either maintained the same ranking as the 2017 report (Singapore) or improved their ranking such as Hong Kong, Shanghai, Tokyo and Busan. In Europe, it is only Athens and Rotterdam that have moved up in their ranking, with the biggest improvement by Rotterdam which moved four places up. Most of the leading maritime cities in Europe in this ranking have suffered a downgrade, such as Hamburg, London and Oslo.

Globally, there has been a 9% rise in the world’s fleet value since 2016. The world’s total fleet value is concentrated in the US, Japan, China and Greece whilst Europe currently remains an important center for shipowners, with roughly 40% of the world fleet value being controlled by owners based there. However, whilst Europe has historically been domi-nant when it comes to ownership, operations

have increasingly moved away from Europe, and today many Asian cities are more impor-tant for operations than traditional European centers. It should also be noted that European ownership dominance is actually on a gradual decline, as Asian shipowners have taken most of the fleet growth in the last few years. Since 2012 the European share of the world fleet (in terms of GT) has fallen from 47 to 35%. Asian owners on the other hand are increasing their market share and now control 41%, up from 38% in 2012. In particular, Chinese owners have increased their share of the fleet and now own 12% of the world fleet.

Based on the objective indicators, Athens and Singapore are the leading shipping centers, followed by Hamburg and Tokyo. This ranking is, to some extent, aligned with what the experts say, with Singapore and Hong Kong in the lead, followed by Athens and Hamburg. The main difference lies with Tokyo, which is subjectively ranked 11th. This is possibly due to Japanese owners being focused on local cooperation instead of having a global outlook. Shanghai is ranked as the 5th strongest shipping city in the world, with an equal score both on the subjec-tive and objective criteria.

Singapore’s strength lies, to a large extent, in its geographic location with close proximity to important markets. The city is a key market place for shipping with an important center for commercial management. Our industry experts rank Singapore highest, while the city scores slightly weaker on the objective criteria.

“The maritime industry will transform; the liner & tanker industry will consolidate leading to merging of suppliers such that only the big

and efficient players or the small and highly innovative players will survive”

– INDUSTRY EXPERT FROM SINGAPORE

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EXPERT ASSESSMENT

For the shipping pillar, the expert panel identi-fied Singapore, Athens and Hong Kong as the overall three leading cities. This is a change from the 2017 analysis since Hong Kong and Athens were not perceived to be in the top 4 as shipping centers, with their positions formerly taken by Hamburg and London. Oslo, Dubai, New York and Busan have also fallen slightly in their overall ranking as shipping cities by the industry experts. This new perception from the industry experts about the ranking of these maritime cities is due to various factors as explained below.

When considering the breakdown of the industry experts’ assessment for the shipping pillar, it is seen from Figure 1B that the preferred maritime cities for all key shipping activities (i.e. ownership, operations and management) are Singapore, London, Hong Kong, Hamburg and Oslo. Of the expert pool used in this study, those business executives with strong insights in ship-ping indicated they would prioritize Singapore,

London, Hong Kong, Hamburg and Oslo should they be given the choice to relocate their companies’ headquarter. This ranking is slightly different when it comes to choosing a city for operating their fleets and companies; Dubai and Shanghai are in the top 5 preferred locations, displacing London and Oslo.

Singapore has a strong position, both com-mercially and operationally, and is also an important meeting place for shipowners even if many of them are not originally from Singapore. An important reason for Singapore’s popularity is its stable pro-business environment. In the recent editions of the World Bank’s “Ease of doing Business” Index, only New Zealand has been ahead of Singapore.

Hong Kong has achieved an overall 2nd posi-tion by our experts, which is a clear improvement from the previous report. Hong Kong is popular for its strong infrastructure in promoting and supporting the ease of conducting shipping busi-ness there, with efficient customs procedures. Hong Kong is ranked 2nd by the industry experts

as the most attractive location for shipping operations and is in 3rd position when it comes to attracting shipping companies’ headquarter for relocation.

Athens is placed 3rd on the subjective ranking. Greek shipowners have been important in the shipping industry for decades and the country used to be home to key industry players such as Aristotle Onassis and Stavros Niarchos. Greece’s shipping magnates have emerged largely un-scathed from the country’s financial crisis and one of the industry’s longest downturns. Today, the shipowning environment is still strong, even though many of the Greek shipowners run their business from other cities.

With Hong Kong and Athens pushing ahead in the experts’ assessment, Hamburg and London are now subjectively ranked 4th and 6th. The drop behind London’s subjective ranking could also be due to the perceived effects of Brexit.

Over the past few years, industry experts have been acknowledging Dubai as having a strong position in the shipping pillar. When asked about the current leading shipping centers, Dubai is ranked 11th but 6th if shipping business execu-tives were given the choice of relocating their companies’ headquarter. Dubai’s best score in the shipping pillar is however from industry experts ranking it 3rd relative to other leading maritime cities for the operations of a shipping business. This suggests that Dubai is seen as an attractive location for shipping activities and might be a growing center for shipping in the future.

Still Singapore keeps its position as the leading ship-ping center in the world. Singapore is home to the third largest fleet in the world (at city level), while the second largest fleet is managed from the city. This demonstrates the strength in operational capabilities in the city. One of the industry experts highlights that the presence of many foreign owners in the city. This illustrates Singapore’s global attractiveness. At the same time, it could also be a sign of vulnerability, because foreign companies probably are more footloose than domestic companies.

Athens’ strengths lie in an impressively large and strong shipowning community. Athens is home to the world’s largest fleet and has a strong ownership posi-tion with more than 700 Greek shipowners located both in Athens and around the world. Many Greek shipowners are in cities outside of Greece, something that can explain why Athens only ranks third on the subjective indicators, while it is number one on objec-tive indicators. Furthermore, Athens is being perceived as primarily serving the local Greek shipping companies and not international shipping entities and hence the experts have voted for other shipping centers that are taking a dominant regional or global role in interna-tional shipping. Greek shipowners have played a key role in the industry for decades, and they are still expected to be a strong player also in the future. This view can be strengthened by looking at the development in order-book volume for Greek shipowners located in Athens, in terms of CGT. The contracted orderbook volume has more than doubled each year since 2016. Thus, Greek shipowners in Athens have experienced an outstanding exponential growth in contracted CGT-values the last few years.

When measured at city level, the worlds’ fourth largest fleet is controlled by owners in the Hamburg region, making it an important shipping hub in Europe. Industry experts also rank Hamburg as one of the five leading shipping centers of the world. Despite this, the value of the German fleet has fallen over the last years. Owners in Hamburg have focused on container ship-ping, a segment that has seen low rates and large bank-ruptcies during the last years. The shipowning commu-nity is also not very strong, the reason for this being that most of their fleet has been financed through KG struc-tures, leaving the individual owners with little control over the fleet. The KG structure is a limited partnership with typically the sole general partner being a limited liability company. It can thus combine the advantages of a partnership with those of the limited liability of a corporation. This could be one of the reasons why rela-tively few companies would consider relocating their shipping headquarter to Hamburg.

Rotterdam has moved up in the ranking this year, due to its improved score on the objective criteria. Rotterdam has benefitted from an increase in the size of the fleet that is controlled as well as managed from the city; the fleet controlled by owners based in Rotterdam has increased by 50% whilst the fleet size that is managed from there has grown by close to 60%.

Fig. 1A - Percentage of industry experts that rank the cities as top-five within shipping activities

Source: Menon (2019)

% of industry experts selecting each city

1009080706050403020100

SINGAPORE

ATHENS

HONG KONG

HAMBURG

OSLO

LONDON

SHANGHAI

COPENHAGEN

TOKYO

ROTTERDAM

DUBAI

NEW YORK

ANTWERP

HOUSTON

BUSAN

OTHER CITIES

Fig. 1B - Preferred city for relocation of headquarter or operations. Number of shipping companies selecting each city

Source: Menon (2017)% of industry experts selecting each city1009080706050403020100

SINGAPORE

LONDON

HONG KONG

HAMBURG

OSLO

DUBAI

COPENHAGEN

SHANGHAI

ROTTERDAM

NEW YORK

ATHENS

LIMASOL

ANTWERP

TOKYO

GENEVA

HQOperations

“The upcoming years in the industry

will see continual growth of maritime

shipping industry and shipowners in

Asia, compared with the rest of the

world”

– Industry Expert

“The ability to develop technology that will meet the new requirements imposed

by environmental challenges and changing regulatory framework”

– INDUSTRY EXPERT FROM OSLO

22 23

OBJECTIVE INDICATORS’ ASSESS-MENT

To be recognized as a leading center for ship-ping, a city must be the registered home to a strong number of shipowners and managers, both in terms of their fleet size as well as fleet value. The number of shipping companies that chose to have their headquarters in a particular city will further impact this city’s ranking in our benchmarking assessment of the objective indicators for the shipping pillar. These objective indicators rank Athens first due to its position as a city controlling and managing the largest and most valuable fleet. Singapore comes second, while Hamburg ranks third.

As of March 2019, the world orderbook in terms of GT is dominated by Japanese, Chinese and Greek owners. When considering the number of ships on order, the leading owners’ country are Japan, China, Singapore, Norway and Greece. This suggests that, from an objec-tive point of view, Athens is likely to keep its position as a significant ownership city, while the importance of both Tokyo and Shanghai will continue to rise.

SIZE OF SHIPOWNERS’ FLEET AND MAN-AGEMENT OF FLEET

In Figure 2, cities are ranked by the total fleet in compensated gross tonnage (CGT) based on owners located there. Data was compiled for the entire world fleet and vessels were then as-signed to individual cities where their owners are located. Athens comes out strongly in the first position, with an owned fleet of 97 million CGT, followed by Tokyo, Singapore and Hamburg each of which have only half this amount. By looking at owners located in a city and not at a country level, hubs like Singapore and Hong Kong will increase their relative importance. National numbers will generally include several shipping communities located within a country.

In addition to ownership, the size of the fleet managed from the different cities were also considered. For an international industry like the maritime business, ownership and manage-ment of companies can easily be split up to take advantage of specialized local competence in different cities. For example, in Singapore, whilst its shipowners control a fleet of 45 million CGT, the city is of such importance for the manage-ment of other fleets that the figure is almost 60% more when measured in terms of managed fleet. An even stronger effect is seen in Busan; the city manages a fleet that is more than four times as large as the owned fleet. Similar effects are observed in Vancouver, Limassol, Glasgow and Manila.

It can also be noted that whilst New York plays a key role in financing maritime operations, its commercial and operational capacity is weak. The fleet managed from New York is only 40% of its controlled fleet. Such weak fleet managed to fleet controlled ratios are also observed in Seoul, Tokyo, Imabari and Oslo.

VALUE OF CITY-CONTROLLED FLEET

Another means of benchmarking the cities is by considering the value of the fleet controlled from these cities. As opposed to the size of a fleet, the value of the fleet offers a better reflection of its economic importance. This evaluation is based on data from Clarksons World Fleet Register and estimating the value of share of the fleet controlled from the city out of its nation. Globally, there has been a rise in the world’s fleet value in the past recent years, with USD 873 bn in 2016 compared to USD 951 bn as of March 2019. The world’s total fleet value is concen-trated in the US, Japan, China and Greece whilst Europe currently remains an important center for shipowners, with roughly 40% of the world fleet value being controlled by owners based there.

At a city level, as shown in Figure 3, the top 15 cities in this ranking control a fleet valued at

more than USD 487 bn which is about half of the world fleet’s value. This share illustrates how im-portant these 15 cities are in the global world of shipping. Tokyo and Athens have increased their fleet value from 2017, whilst a drop in fleet value is observed for Singapore and New York, possibly as a result of a decrease in their fleet size either through the sale or the scrapping of ships.

The composition of the merchant fleet differs between cities. Athens might be best known for being home to a large tanker fleet, but the city also has a substantial fleet within the bulk, container and gas carrying segment. Tokyo has a well-diversified fleet consisting of bulkers, tankers, ro-ro vessels and gas carriers. Hamburg is quite specialized within containerships, while Singapore has its strength within tankers, bulkers, offshore and containerships.

NUMBER OF SHIPPING HEADQUARTERS

The location of shipping companies is a strong indicator of a city’s attractiveness. Figure 4 shows the number of shipping companies with headquarters in each city. Athens is ahead of all other cities for this indicator with 193 shipping companies registered there, followed closely by Singapore and Jakarta. Next in line, but with a drop of almost half of the amount of shipping companies that are headquartered in Athens are Hamburg and Tokyo. Rotterdam, Istanbul, Dubai have on average 66 shipping companies headquartered there. It should be emphasized, however, that although only companies with at least 5 ships are included, cities with many small companies are favored on this indicator compared to cities with few but large companies. Copenhagen, with the A.P. Møller-Mærsk head-quarter, falls weak on this indicator.

1009080706050403020100

ATHENS

TOKYO

HAMBURG

SINGAPORE

SHANGHAI

MIAMI

OSLO

IMABARI

COPENHAGEN

SEOUL

NEW YORK

ROTTERDAM

LONDON

MARSEILLE

BERGEN

Fig. 3 - The 15 most valuable fleets in the world. Value in Bill USD of the fleet controlled by companies with headquarter in the city

Source: Clarksons/ Menon (2019)

USD bn

200

180

160

140

120

100806040200

ATHENS

SINGAPORE

JAKARTA

HAMBURG

TOKYO

ROTTERDAM

ISTANBUL

DUBAI

IMABARI

HONG KONG

SEOUL

LONDON

SHANGHAI

BUSAN

MUMBAI

Fig. 4 - Number of listed shipping companies with headquarters in the city

Source: Bureau van Dijk (2017)

Fig. 2 - CGT owned by shipmanagers registered in the city / Size of fleet (CGT) controlled by shipowners registered in a city

Source: Clarksons/ Menon (2019)

Million CGT

ATHENS

SINGAPORE

HAMBURG

HONG KONG

TOKYO

LONDON

SHANGHAI

DUBAI

BUSAN

COPENHAGEN

ROTTERDAM

ISTANBUL

JAKARTA

LIMASOL

MUMBAI

1009080706050403020100

ManagedOwned

24 25

MARITIME FINANCE AND LAW

Overall, London is ranked first in the world for maritime finance and law, followed by New York, Oslo, Hong Kong and Singapore. London has a special position in the financial industry globally and is widely recognized for its law-related and marine insurance services. It is home to world-leading institutions, such as Lloyd’s for insurance, and English law is the most widely applied in shipping disputes. New York, Hong Kong and Singapore together with London, are considered the four leading global financial cities according to the Global Financial Centres Index.

When it comes to maritime finance, our data rank New York first, followed by Oslo. New York is home to the world’s largest maritime stock exchange and plays a key role in financing maritime operations. In the last few years, the importance of private equity in the industry has increased at the expense of traditional shipping banks, and New York based institutions have played a key role in this development. There seems to be a roll back now with banks again playing the major role in financing. In terms of the number of listed maritime companies on their local stock exchanges, Hong Kong, Tokyo and Shanghai have also boosted their numbers since 2017, indicating that they are attractive markets for registering new companies (IPOs).

Oslo’s strong position in maritime finance is mainly due to Norway’s strong historical posi-tion in the maritime industry and the develop-ment of world leading financial services that have supported this industry. Oslo is home to

the world’s two leading shipping banks and has a strong position with a maritime focused stock exchange and leading insurance and brokering entities.

In ship financing, whilst Rotterdam is behind Oslo, it is still considered a leading city in this aspect, with a 50% increase in loan value from 2017. Rotterdam-based banks ING and ABN AMRO have boosted their position for both bookrunner loans and in their MLA (Mandated Lead Arranger) portfolios.

Following the recent shipping crisis, Asian (particularly Chinese banks) have emerged in ship finance and as of today, three out of global top ten banks are now Chinese banks (e.g. Bank of China, ICBC, China Exim). When assessing top shipping portfolios by banks headquartered in various cities across the world, Beijing is the top performer, followed by Tokyo, Paris, Oslo and Rotterdam.

According to the industry experts, there seems to be four cities that stand out for mari-time finance – London, Oslo, New York but also Singapore. They ranked Singapore as the second most important city even though on the objective criteria Singapore is in the 9th position, behind Rotterdam, Hong Kong and Shanghai.

SUMMARY

21 3 4 5LONDON NEW YORK OSLO SINGAPOREHONG KONG

RANKING MARITIME FINANCE AND LAW

OBJECTIVE INDICATORS SUBJECTIVE INDICATORS

“Funding accessibility seems to be progressively shifting to the Far East and is expected to remain

as such whether China (through Hong Kong or Shanghai) will start putting local content, or

in-country value assessments to access the funding.“

– INDUSTRY EXPERT FROM HAMBURG

26 27

EXPERT ASSESSMENT

Maritime activities tie up large amounts of capital. The industry is characterized by cyclical markets. Hence, access to capital will determine the long-term success of many companies. Companies finance themselves by offering bonds, loans and stocks to owners and other financial entities. London, Singapore, Oslo and New York remain the clear leaders within this field, according to the industry experts, due to their strong positions in banking, law, insurance and brokering services. The main difference in the experts’ opinion compared to the previous assessment is that Tokyo and Dubai are now judged to be better in the maritime finance and law pillar, whilst Athens, Houston and Busan have dropped in this subjective assessment.

OBJECTIVE INDICATORS’ ASSESS-MENT

Eight objective indicators were chosen to bench-mark the leading maritime financial and legal centers. These indicators measure the volume of legal and financial expertise and associated activities in each selected city – from the number of maritime legal experts rooted in each location to the volume of mandated loans issued from the financial institutes and companies that provide financing (debt, equity, mezzanine) for the in-dustry, primarily for the sale and purchase of ves-sels. These companies also include international and investment banks, private equity firms as well as smaller boutiques, which act as arrangers or introducers of capital. Data on the number of listed maritime companies, and volume of traded bonds, IPO and follow-ons from stock exchanges headquartered in each city was also used as an objective indicator.

LEADING FINANCIAL CITIES

Maritime cities have been benchmarked based on the market value and the number of listed maritime companies on their local stock ex-changes. New York is by far the largest equity market in the world for maritime stocks, both in number of tradable stocks and market capitaliza-tion of the companies.

Compared to the 2017 results, Oslo has main-tained its second position when it comes to the number of tradable stocks. Hong Kong, Tokyo and Shanghai have boosted their numbers since 2017, indicating that they are attractive markets for registering new stocks. Singapore which was previously ranked third, has now dropped to the 7th position in a tie with Kuala Lumpur, noting that Kuala Lumpur, Busan and Mumbai have maintained the same number of tradable stocks since 2017.

In terms of market capitalization of maritime stocks, Shanghai and Copenhagen have main-tained their 2nd and 3rd ranks, respectively, after New York, even though there was an overall reduction in their values from 2017. On both these two exchanges, one or two major compa-nies dominate the value of maritime stocks. In Shanghai, China Shipbuilding Industry combined with Shanghai International Port Group, has a combined market capitalization of USD 43.5 bn, while A.P. Møller-Mærsk A/S traded at a total value of USD 26.5 bn on the stock exchange in Copenhagen. That is approximately the same value as world-leading companies in other indus-tries such as Kraft Foods and Hyundai Motor. It is also observed that Oslo suffered a 30% drop from its 2017 market value mainly because of the decline in the offshore industry, for example among seismic service companies like PGS and subsea construction, like Subsea 7.

When considering the trading volume of bonds, IPO and follow-ons from each city’s stock exchange during the period 2017 to 2019, New York is leading, followed by Hong Kong, Oslo

and Shanghai. Singapore, in the 5th position, traded almost half of what Oslo achieved during the same period.

BANKS – SHIP FINANCING

Whilst New York stands out as the leading financial capital of the world, in Europe, Oslo and Rotterdam seem to be the two leading cities for ship finance. Oslo-based DNB and Nordea (ship-ping division) are the two leading ship finance banks measured in terms of book runner and MLA (Mandated Lead Arranger) portfolios. In Rotterdam, the banks ING and ABN AMRO have boosted their position for both bookrunner loans and in MLA. BNP Paribas, based in Paris, is a new entry, whereas New York is losing its position, with Citi falling on both bookrunner and MLA. Danske Bank in Copenhagen has also fallen in bookrunner loans while Stockholm-based SEB has improved its position in MLA.

Many ships are financed by syndicated loans, which reduce the risk for the individual lenders. In this process one bank usually functions as the mandated lead arranger. That means that the bank has the leading role in the financing stage of a project. During the syndication process one of the banks may also fulfil the role of book runner. When the structure and terms of the loan have been agreed, one (or a number) of banks will be appointed “book runner” and sell the loan to other banks in the syndicated loan market. In some markets national export credit banks also play a key role in the financing process. Oslo is the most important center in the world for this kind of financing. Both Nordea and DNB have their shipping headquarters located in Oslo, with regional offices in maritime cities like London, New York, Singapore and Shanghai.

However, in general, with traditional European banks gradually cutting back on ship financing and with owners increasingly looking for alternative ways to finance their fleet renewal

Fig. 5 - The five leading maritime financial and legal centers, according to industry experts

Source: Menon (2019)

% of industry experts selecting each city

1009080706050403020100

LONDON

SINGAPORE

OSLO

NEW YORK

HONG KONG

HAMBURG

SHANGHAI

TOKYO

ROTTERDAM

ATHENS

DUBAI

COPENHAGEN

ANTWERP

HOUSTON

BUSAN

OTHER CITIES

Fig. 7 - IPO/Bonds/Follow-ons during the period 2017 to 2019

Source: Menon (2019)

bn USD

20181614121086420

NEW YORK

HONG KONG

OSLO

SHANGHAI

SINGAPORE

DUBAI

BUSAN

LONDON

MUMBAI

COPENHAGEN

TOKYO

SYDNEY

MANILA

ATHENS

JAKARTA

Fig. 8 - Shipping banks portfolio

Source: Petrofin Bank Research

bn USD

50403020100

BEIJING

TOKYO

PARIS

OSLO

ROTTERDAM

SEOUL

NEW YORK

COPENHAGEN

LONDON

STOCKHOLM

1009080706050403020100

NEW YORK

SHANGHAI

COPENHAGEN

LONDON

TOKYO

BUSAN

SINGAPORE

OSLO

DUBAI

HONG KONG

Fig. 6 - Market value and number of listed maritime companies on local stock exchange

Source: Clarkson and ORBIS/Bureu van Dijk and Bloomberg

bn USD

and investment programs, Chinese lenders, leasing institutions and export-import agen-cies are quickly filling a critical void left by the retreat of European commercial banks, especially for newbuilding orders. Prior to the shipping crisis European banks dominated in global ship financing sector. Five out of global top ten were in Germany, two in Scandinavia, one in the UK, one in France and only one was based in Asia. However, with the crisis many traditional lenders experienced heavy hits on their P&L and were forced to write-off, reduce or even exit their ship-ping portfolios. Due to the shipping crisis, Asian (particularly Chinese banks) have emerged in ship finance and as of today, three out of global top ten banks are now Chinese banks (e.g. Bank of China, ICBC, China Exim). When assessing top shipping portfolios by banks headquartered in various cities across the world, Beijing is the top performer, followed by Tokyo. Considering that the recent slowdown in the Chinese economy and with fewer newbuilding orders, it is ex-pected that the financing from banks based in the Far East may also be affected.

LEGAL CENTERS

To assess the strength of cities when it comes to maritime law, the use of statistics such as the number of leading legal experts in shipping law as well as the number of maritime lawyers from the broader maritime sector give an indication of a city’s importance for financial and legal transactions. Strong knowledge centers with many experts also attract more business to a city. Who’s Who Legal, which identifies the foremost legal practitioners in business law based upon comprehensive and independent research, shows that London, by far, has the largest number of leading legal experts (81) in maritime law. Behind London are Hamburg, Singapore, New York and Hong Kong with an average of 20 such legal experts. When considering the broader maritime sector, statistics show that London remains the

leading city with the highest number of maritime lawyers, followed closely by New York and Athens. Whilst Athens is home to 60 maritime lawyers, Singapore, Hamburg and Hong Kong have an average of 30 such lawyers.

What these statistics show is that, with English law far widely used in shipping disputes, London has sealed its position as the best location to resolve maritime disputes and for international maritime arbitrations. In that aspect, Singapore and Hong Kong could be London’s strongest competitors. In Singapore, the efforts of the Singapore Maritime Foundation (SMF) to de-velop the city’s own Ship Sale Form and SMF’s involvement in the development of a modern Charter Party Form together with BIMCO and Association of Shipbrokers and Agents (ASBA) incorporating Singapore as the location of arbitration (in addition to New York and London), reflects the growing importance of Singapore as a leading international maritime legal center. The strength of both Singapore and Hong Kong seems to be related to their proximity to commercial operations and access to key industry players, with Hong Kong positioned as a gateway to mainland China. In the Middle East, whilst not a direct challenger to London, Dubai is also building its reputation as a maritime legal center. The Emirates Maritime Arbitration Centre (EMAC) was launched in 2016 and aims to serve as the first specialized marine arbitration center in the Middle East.

MARINE INSURANCE

Marine insurance was the earliest well-developed kind of insurance, with origins in the Greek and Roman maritime loan. Marine insurance in the modern world is a prerequisite for a functioning shipping market. Large shipping companies transport cargo worth hundreds of millions of dollars every day on large ships that them-selves might be as valuable as their cargo. To reduce risk involved in such operations, shipping

companies insure both the cargo and the hull of the ship.

To assess a city’s position in terms of its repu-tation as a market place for insurance coverage and its marine insurance services, several factors were considered such as concentration of P&I clubs and the collected insurance premium at city level, and the presence of commercial insurances covering cargo, hull and machinery (H&M). This assessment shows that London, home to the first marine insurance company in the early 18th century with Lloyd’s of London and complemented by the International Underwriting Association (IUA), continues to be the unrivalled city for marine insurance with more than 50% of International Group (IG) of P&I clubs covered gross tonnage served by UK-based clubs, over 30% of global cargo and H&M premium collected by UK-headquartered insurance companies and the highest number of representation offices of all clusters. However, considering the recent acquisition of rival Jardine Lloyd Thompson (by Marsh’s parent company Marsh & McLennan Companies), there might be an impact on future ranking for London as the company is now headquartered in New York. There is already a positive development for New York; the city has shifted three levels up from our previous report and is now in the 4th position behind Tokyo and Singapore.

Out of Asia, Tokyo and Shanghai have maintained their positions in the top 5, with their focus being mainly on domestic clients. Singapore has dramatically improved and is now ranked 3rd in this indicator, possibly as a result of its efforts to increase its marine insurance activities by introducing its own Singapore War Risk Mutual supported by its industry association (Singapore Shipping Association, SSA).

Fig. 9 - Number of leading maritime legal experts (green) and laywers (blue) practicing in the city

Source: Who’s Who and World Ship Register

1009080706050403020100

LONDON

HAMBURG

NEW YORK

SINGAPORE

HONG KONG

ATHENS

SYDNEY

GENOA

DUBAI

OSLO

Legal Maritime ExpertsMaritime Lawyers

8

90

35

8

16

37

27

25

52

47

2

28 29

MARITIME TECHNOLOGY

Benchmarking of cities, based on objective indicators, for their standing on maritime technology is challenging. Ideally, measures of R&D, education and innovation should be used. However, it is hard to find global data sources at city-level that compare the magnitude, rele-vance and quality of maritime research, educa-tion and innovation. Such factors are more suited for subjective assessments by maritime experts. Some dimensions of maritime tech-nology that can be objectively measured have nevertheless been identified and include size of fleet (CGT) delivered by shipyards, share of world fleet by classification societies, trend in the purchasing prices of ships built at active shipyards, the number of patents by maritime companies based in a city as well as the number of maritime education institutions found there.

Oslo is ranked as the world leading city when it comes to maritime technology – based on the objective criteria and experts’ assess-ment – followed by London, Hamburg and Busan. With London, Hamburg, Rotterdam and Athens having now moved up in the mari-time technology rank, this resulted in a down shuffling of other cities such as Singapore and Shanghai.

One of the most important technology companies in the Norwegian cluster is DNV GL with its head office in Oslo. DNV GL is one of the world’s leading maritime R&D companies, investing 5% of its revenues on new technology development, as well as the world’s largest ship classification society according to Lloyd’s List.

The Oslo region also hosts world leading equip-ment producers, like Kongsberg Maritime and smaller specialized tech-companies such as Xeneta.

London scores greatly from its prestigious maritime education institutions and for being the home of the oldest classification society with a history from 1760, Lloyd’s Register. Busan’s good ranking in this pillar is primarily due to its big fleet size (CGT) delivered by its shipyards, the market value of the ships built there, as well as leading in the number of patents produced by the maritime firms headquartered there. Busan is the center for the South Korean shipbuilding cluster where the major shipyards focus on offshore units and high value-added “mega-ships” such as container ships, VLCCs and LNG tankers.

Tokyo, with the presence of classification body ClassNK, the size of its classified fleet and its second position in terms of number of patents, places the city within the top 5 in this pillar. ClassNK is the world’s second largest classification society and has large parts of its research and development located in the Tokyo area. Tokyo also has some yard activity located within the regional boundaries. On the subjective criteria, industry experts rank Tokyo as the 8th most important city for maritime technology.

SUMMARY

1OSLO

3HAMBURG

2LONDON

4BUSAN

5TOKYO

“The maritime industry will see increased focus on digitalization and data analytics, with an

intention to strengthen cybersecurity”

– INDUSTRY EXPERT FROM SINGAPORE

RANKING

OBJECTIVE INDICATORS SUBJECTIVE INDICATORS

30 31

EXPERT ASSESSMENT

The expert assessment for the maritime tech-nology pillar has been maintained from the previous report; Oslo, Singapore, Hamburg, Copenhagen and Shanghai are the overall five leading cities under this pillar. Only a swap be-tween Oslo and Singapore has occurred, which now places Oslo first in the experts’ opinion for offering topnotch R&D institutions and for being home to a highly advanced maritime equip-ment industry. When seeking experts’ opinion on a new indicator related to cities which are at the forefront of environmentally sustainable technologies and solutions for the oceans, Oslo is acknowledged to be the leading city, with a higher score than the combined value of the three next in the rank – Singapore, Copenhagen and Rotterdam. Note that the equipment manufacturing is often located outside of the city region, whereas technology development and engineering are to a large extent within.

Another key finding is that London has moved up in the overall subjective assessment and pushed ahead of Rotterdam, Tokyo and Busan, the latter two being strong on shipbuilding. This is due to London’s recognition for being the home of excellent educational and R&D centers, as can be seen when considering the breakdown of the experts’ assessment.

KNOWLEDGE CENTERS – R&D AND EDU-CATION

Maritime experts in this study identified Singapore, Oslo and Hamburg as being the leading maritime knowledge centers. High labor costs have forced the Norwegian and German maritime industry to seek technological advance-ment. Close links between educational centers, shipowners and manufacturers are critical for being a strong maritime center for R&D. The closely knit Norwegian maritime industry gives Oslo an advantage; from Oslo one can

easily connect to other local maritime clusters in Norway. Hamburg has been the center for R&D in the German maritime industry. Since 1965, the city has been home to the Center for Maritime Technologies, and its predecessor Forschungszentrum des Deutschen Schiffbaus. The center’s goal is to promote cooperation between various players in the industry and the academic world, universities and government agencies.

London, Shanghai and Copenhagen follow these top three cities in this ranking. London is particularly strong in maritime finance, for ex-ample with a specialized MSc in Shipping, Trade & Finance at Cass Business School. Rotterdam, having several universities and research institu-tions specialized in maritime, is placed in 7th position by the experts in this category. MARIN, the Maritime Research Institute Netherlands, is one of the leading institutes in the world for hydrodynamic research and maritime technology. Netherlands’ Maritime University offers a MSc in Shipping and Transport (both full and part time) and has been set up in close cooperation with the maritime business community.

MARITIME TECHNOLOGY & EQUIPMENT

There is generally a demand for specialized equipment in the maritime industry to cater for improved efficiency under sea conditions as well as to address new operational limitations due to recent environmental regulations. Environmental regulations create new niche markets for mari-time equipment, from ballast water treatment systems to marinized long-life batteries and new designs of engines running on unconventional marine fuels or other solutions for compliance against the upcoming IMO regulations such as the sulphur cap.

When assessing cities which are strongest in supporting and nurturing the development of maritime technology and equipment, the expert panel point to Singapore, Oslo, Shanghai,

Hamburg and Busan as the places to go for world-class specialized maritime equipment.

Singapore’s top rank is due to the city being a market place where buyers and sellers can meet, even without companies necessarily producing ship equipment and technological products in Singapore. Maritime business executives view Singapore as a place where all major marine equipment players are operating and where a high level of sophistication and competence exist locally to support high-value newbuilding of offshore assets, conversion projects, fabrication of process modules or to perform complex repair activities in Singapore efficiently with quick turnaround. Furthermore, the Maritime and Port Authority of Singapore (MPA) has put tremen-dous focus on R&D and advanced maritime tech-nology as one of their core pillars in promoting Singapore as a global maritime hub. The strategy is backed by a significant funding through the Maritime Innovation and Technology (MINT) Fund since 2003. The fund was extended and topped up in 2013. Singapore also seeks close cooperation between publicly-funded institutions and private companies, as well as close collabora-tions with other leading maritime research insti-tutions, such as the Research Council of Norway.

Chinese yards import around 50% of equip-ment installed in vessels, which illustrates that the most advanced parts of the equipment industry are still found outside of China. At the same time the technical capacity in the country is increasing. According to the State Intellectual Property Office, the number of patents relating to shipbuilding grew by more than 70% from 2008 to 2013.

Norway and Germany both have a long tradition of producing maritime equipment within a high cost environment. This has pushed Norwegian and German maritime equipment suppliers to develop and deliver innovative and advanced equipment with a high level of added value.

ENVIRONMENTALLY SUSTAINABLE TECHNOLOGIES & SOLUTIONS FOR THE OCEANS

Considering the major environmental challenges connected to the seaborne trade – and the huge opportunities for maritime companies to be part of the solution to these challenges – a new indicator was introduced this year on this topic; experts were asked which cities are in the fore-front of environmentally sustainable technologies and solutions for the oceans. On this indicator, Oslo stands out as the main center for ocean technologies and solutions, with a higher score than the combined value of the three next in the rank – Singapore, Copenhagen and Rotterdam. It is also interesting to observe that, except for Singapore, ocean technologies and solutions are dominated by European cities in the top 5 ranks.

Oslo is forging its position in this aspect through a strong and collaborative partnership with key players to focus on ocean technology and sustainability. It aims to be the world’s leading capital and ecosystem for sustainability-oriented ocean tech entrepreneurs. Key partners in this movement for sustainable ocean business

include Nor-Shipping; the Katapult Ocean – an impact investment fund and accelerator program targeting sustainable solutions across ocean in-dustries; EntrepreneurShip One – a zero emission pay-it-forward platform for the Nordic startup community; Ocean Industry Forum Oslofjord; Circular Norway; the environmental NGO Bellona, as well as a broad range of key maritime companies and cluster organisations

DIGITAL SERVICES

Last but not least, the industry experts were also asked in which cities they would find companies producing world-class maritime IT services and IT-based products. This is an important aspect to capture the expert panel’s assessment on, since it is a strong indicator of how well a city is gearing itself to provide upgraded digital infrastructure as well as an environment that supports disruptive innovation models to its maritime industry. A location that offers such an environment condu-cive for innovation in the maritime industry will generally have a strong competitive edge.

In this aspect, the maritime experts score Singapore and Oslo score highest, followed by

Copenhagen, Hamburg and London. An inter-esting observation is that Shanghai is regarded as being better than Rotterdam in being a city of world-class maritime IT, with a perception by the industry experts that it is well prepared to ride the digital transformation wave of the maritime industry.

In Singapore, MPA has been extremely proactive in promoting digital innovation and entrepreneurship within the Singapore maritime eco-system by launching the Pier71 to attract, build and accelerate start-ups, establishment of the Singapore Maritime Datahub to serve as collaborative platform for technology companies, startups and maritime stakeholders to co-de-velop innovative data-driven maritime solutions and renewed its collaboration agreement with the Research Council of Norway (RCN) to focus on Maritime Digitalization and Autonomous Vessels and Systems.

Fig. 10 - Share of industry experts that mention the city as “producing world class digital services and maritime IT-products”

Source: Menon (2019) % of industry experts selecting each city

Fig. 11 - Share of industry experts that mention the city as “leading maritime R&D & educational centers of the world”

Source: Menon (2019) % of industry experts selecting each city

Fig. 12 - Share of industry experts that mention the city as “in the forefront of environmentally sustainable technologies and solutions for the oceans” Source: Menon (2019)

% of industry experts selecting each city

1009080706050403020100

1009080706050403020100

1009080706050403020100

SINGAPORE

OSLO

COPENHAGEN

HAMBURG

LONDON

SHANGHAI

ROTTERDAM

TOKYO

HONG KONG

ATHENS

HOUSTON

BUSAN

NEW YORK

ANTWERP

DUBAI

OTHER CITIES

SINGAPORE

OSLO

HAMBURG

LONDON

SHANGHAI

COPENHAGEN

ROTTERDAM

TOKYO

BUSAN

ATHENS

NEW YORK

HONG KONG

ANTWERP

HOUSTON

DUBAI

OTHER CITIES

OSLO

SINGAPORE

COPENHAGEN

ROTTERDAM

HAMBURG

LONDON

TOKYO

ANTWERP

BERGEN

HONG KONG

SHANGHAI

NEW YORK

BUSAN

TRONDHEIM

DUBAI

ATHENS

150

125

1007550250

OSLO

TOKYO

HOUSTON

LONDON

PARIS

BEIJING

BUSAN

GENOA

JAKARTA

ST. PETERSBURG

HAMBURG

MUMBAI

Fig. 14 - Size of fleet by classification societies headquarter (million CGT).

Source: Clarksons/Menon (2019)

million CGT

200

180

160

140

120

100806040200

BUSAN

SHANGHAI

INSTANBUL

DALIAN

GUANGZHOU

SINGAPORE

ROTTERDAM

QINGDAO

KOBE

NINGBO

TIANJIN

ISTANBUL

Fig. 13 - Size of fleet (CGT) delivered by active shipyards as of current fleet and orderbook.

Source: Clarksons/Menon (2019)

million CGT

121086420

BUSAN

DALIAN

SHANGHAI

IMABARI

SINGAPORE

GUANGZHU

QINGDAO

HO CHI MINH

NINGBO

KOBE

Fig. 15 - Market value of listed shipyards and technical service providers (by year-end 2018). By city headquarter (value in bn USD)

Source: Clarkson & ORBIS

bn USD

32 33

OBJECTIVE INDICATORS’ ASSESS-MENT

SHIPBUILDING

At shipyards the demands from design and industry standards are put into action. Modern ships are a mosaic of parts from numerous subcontractors that become high-tech indus-trial assets for their owners. Assembling ships is a technologically and logistically demanding operation. Some shipyards build the entire ship in one location. For more technologically advanced ships, it is common for hull construction to occur in low cost countries before outfitting is done in countries with more highly skilled and costly labor. Shipyards are often surrounded by mari-time equipment companies that supply them. These companies are therefore considered vital for the completeness of a maritime cluster.

One indication of the sophistication and leading technical competence in Europe can be seen when comparing the size and value of European yards’ orderbook. Measured in size, European yards have less than 1% of the world orderbook (CGT), whereas when measured in value, European yards hold 4% of the world orderbook. This is due to the European yards’ focus on high-end markets such as cruise, com-plex offshore assets and navy. Singapore would also score high on this measure as the city-state focuses on high value rigs and conversion/modifi-cations of offshore structures.

When considering only the currently active shipyards and for the 50 cities for which the overall benchmarking is being done, a ranking based on both delivered CGT and current orderbook from these yards show that Busan is by far the leading city in this field. The region surrounding Busan is the center for the South Korean shipbuilding cluster and offers deep wa-ters free from sand-banks. The major shipyards focus on offshore units and high value-added “mega-ships” such as container ships, VLCCs

and LNG tankers. The yards in this region are also highly influenced by a mix of overcapacity in the market and the slow-down in newbuilding orders for the offshore oil and gas industry.

China is the world’s second largest ship manu-facturer in CGT (through its yards in Shanghai, Dalian and Guangzhou) and but is not yet as technologically advanced as the South Korean shipyards. The main vessel types leaving the Chinese yards have been bulkers, fishing vessels, tugs, general cargo ships and products tankers. Japan, with its large domestic market, comes third with the main contribution from yards in Imabari, primarily serving the fishing, general cargo and bulk carrier segments.

Italy, Germany, the Netherlands, France and Norway are the leading shipbuilders in Europe. Italian shipyards are known for their yachts, fishing vessels and passenger cruise ships, while German yards have primarily focused on con-tainerships, cruise and general cargo ships. The Netherlands also has a history in building chem-ical inland waterway vessels, fishing vessels and general cargo ships. The Norwegian shipbuilding industry has for many years been specialized on highly advanced offshore vessels, but after the offshore crisis in 2015, has restructured toward fishing vessels, ferries, specialized cruise ships and other high value segments.

CLASSIFICATION SOCIETIES

A classification society is a non-governmental organisation that establishes and maintains the technical standards for ships and offshore struc-tures. All class societies have a strong focus on R&D. Most of the members of IACS (International Association of Classification Societies) are foun-dations with a focus on supporting the industry and safety at sea. The societies are important technological R&D centers as they certify tech-nological changes in constructions. Classification societies play a vital role in quality assurance in the maritime industry. Most societies have an

international presence as this has become a pre-requisite for serving the global industry. Many of the class societies have broadened their market focus during the last years.

When ranking the classification societies in terms of the size of their classified fleet, DNV GL, formed through the merger between Norway’s DNV and Germany’s Germanischer Lloyd and with its headquarters based in Oslo, takes the first place and thus pushes Oslo ahead in the city ranking. Tokyo with ClassNK takes the second position, followed by Houston which does well on this objective indicator much due to the presence of American Bureau of Shipping (ABS). Houston is also one of the leading centers of the world for offshore oil and gas activities, regarded by many as the world’s leading center for oilfield equipment. Lloyd’s Register, the oldest classifica-tion society with a history from 1760, headquar-tered in London places this city the fourth place, as shown in Figure 14 In the fifth place is Paris with Bureau Veritas. Beijing appears in the sixth position with China Classification Society.

MARKET VALUE OF SHIPS BUILT AT SHIP-YARDS

Another parameter to understand the value-add of a yard to a maritime city is to factor in the market value of the ships built at the city’s yard(s). Thus, when considering the recent pur-chasing price of ships built at different shipyards from 2017 to 2019 (as shown in Figure 15), Busan has sold ships from its shipyards at a price of USD 11.8 bn during this period whilst Dalian, Shanghai and Imabari have averaged at a price of USD 1.9 bn or 6 times less the price from Busan yards.

PATENTS BY MARITIME COMPANIES

Another means to measure how well a city’s poli-cies support R&D and innovation for its maritime industry is by considering the number of patents produced by maritime firms which are headquar-tered in that city. The patents analyzed for this indicator have been accumulated over several years and are a good measure of the technolog-ical sophistication and innovation within a com-pany and thus an industry. From Figure 16, Busan had the highest number of patents in 2018,

followed closely by Tokyo. Daewoo Shipbuilding & Marine Engineering Co. Ltd. holds almost 80% of the patents in Busan, classified under the “building of ships and floating structures” maritime segment (as per the NACE code). The remaining 20% of patents in Busan are split over more than 100 companies, all under the NACE code 3315 which is for “repair and maintenance of ships and boats”.

In Tokyo, the “building of ships and floating structures” segment accounts for 93% of its total patents and held entirely by Mitsui E&S Holdings Co. Ltd. Remaining 7% patents are mostly held by Nippon Yusen Kabushiki Kaisha for the NACE segment “sea and coastal freight water transport”.

In Europe, maritime cities such as Hamburg, London, Paris, Oslo and Rotterdam have only a small fraction of what Busan and Tokyo demon-strate in this field.

MARITIME EDUCATION INSTITUTIONS

The number of maritime education institutions found in a city is a strong message from the city on the importance it puts on the need for a culture of learning to improve and replenish the workforce for the maritime industry. Maritime companies in such a city benefit from the ease of finding a skilled maritime workforce. Thus, when considering the number of maritime education institutions found in each maritime city, London is the leading city and home to some prestigious maritime academies such as Cass Business School and London Shipping Law Centre. Rotterdam follows closely behind, where its maritime-focused educational institutions have a global reputation for excellence. Athens and Hamburg are in a tie, in the 3rd position, whilst Manila and Singapore hold the 4th position. Manila is a well-known training ground for seafarers, whereas in Singapore, the Bachelor and Master in Maritime Studies degree programs offered by NTU has been a significant source of maritime talent pipeline for more than a decade.

302520151050

LONDON

ROTTERDAM

HAMBURG

ATHENS

SINGAPORE

MANILA

ANTWERP

GLASGOW

MUMBAI

OSLO

HELSINKI

ABERDEEN

COPENHAGEN

SHANGHAI

VALLETTA

Fig. 17 - Number of maritime Education Institutions per city

Source: World Shipping Register

10 000

9 000

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 0000

BUSAN

TOKYO

CHICAGO

HAMBURG

LONDON

PARIS

OSLO

SEOUL

ROTTERDAM

HELSINKI

Fig. 16 - Number of patents developed by maritime firms per city

Source: ORBIS/Bureu van Dijk

Strategic focus on innovation and

development, with support frame-

work for SME’s & individuals to foster

innovation. The path should be clear

and well communicated. Create a

structure within the government to

help companies that are trying to

build or create something innovative

in terms of providing opportunities for

partnerships and pilots.

– Industry Expert from Dubai

34 35

RANKING

OBJECTIVE INDICATORS SUBJECTIVE INDICATORS

PORTS AND LOGISTICS SERVICES

Singapore is a top performer for port services